US markets stall, but don’t fall

The XJO is expected to edge higher on open this morning following a U.S overnight that showed a continued willingness to hold their highs. Their futures are flat this morning.

Markets are consolidating at the top of the range as they hold their highs but are unwilling to break through key resistance. Our market is grinding along 7,000 resistance and holding the downtrend line. This morning our futures are indicating that we will peak above these levels, but without the U.S getting on board, it feels unlikely we will break preemptively.

However, there is an argument to be made that our market could reach 7,100 prior to the U.S breaking their own resistance. The logic would be that the recent run up in the U.S was driven on hope that their economy had seen peak interest rates. They reached their previous peak, which in equivalence would be roughly 7,100 for our market. We shared in the gains, but not as much as the U.S, reaching only 7,000. This may be because we did not have the same monetary policy outlook driving our rally. We had an RBA meeting around the corner where a rate rise was expected and it was unknown how hawkish or dovish our RBA would be going forward. Now that is out of the way, and our market has interpreted our RBA in a rather dovish way, we could rise up to 7,100 to meet the U.S. This would also have us meet the day 50 MA roughly.

Regardless, our moves will still likely be dictated by how the U.S trades. Its just there may be a reason for our market to market to make some small gains if the U.S continues to consolidate here and hold strength. If they were to fail at resistance however, which seems completely reasonable following such a stellar run, then our market will do so as well.

US Markets

US shares closed flat overnight, with little change across the three major indices. There wasn’t a whole lot to remark on for shares overnight, and instead, prices stalled after the recent strong upwards movement that they have enjoyed. With the momentum slowing, don’t be surprised to see a small pullback and some profit taking in US markets soon. Regardless, investor sentiment seems to have shifted across the past week following the Federal Reserve meeting for November. Investors now seem to believe that interest rates have peaked and that the next move will likely be a rate cut. Investors will likely want to see economic data gradually slow to confirm this view, so be careful around major economic data points at the moment. The next major data point will be US CPI data on Tuesday next week.

Five of the eleven sector groups of the S&P500 closed higher overnight, with Technology and Real Estate the best performers. Utilities and Energy stocks were the weakest performers.

Technically, the S&P500 is stalling around the resistance at 4,385, which was a peak in early October. Should the index close above these levels, it will be a higher high than the previous peak, which could suggest a change in the longer-term downtrend. Should the index hold resistance at this peak then fall, we would be looking for it to record a higher trough, perhaps finding some support around 4,220.

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